In the words of Austrac: "It is essential to the integrity of the financial system that a major bank such as CommBank has compliant and appropriate risk based systems and controls in place to deter money laundering and terrorism finance."

CBA says it is cooperating with Austrac but it is yet to officially respond to the allegations. Until then, they remain allegations. But the response is something the board and chief executive Ian Narev will need to carefully think about.

Advertisement

CBA boss Ian Narev.Credit:Alex Ellinghausen

Allegations that the bank enabled crooks to deposit cash using fake names then transfer the money overseas, time and time again, isn't a good look. Even worse, is when they are told about the wrong doing but do nothing about it.

With the country on high alert about potential terrorism vulnerabilities the banks, now more than ever, need to be on top of their game when it comes to detecting potential suspicious transactions.

According to a summary of a 500 page statement of claim lodged by the government's financial intelligence unit, Austrac, CBA not only breached the act but even after it became aware of the suspected money laundering it failed to manage the risks.

Austrac estimates that $8.9 billion was deposited through Commonwealth Bank's Intelligent Deposit Machines (IDMs) before any risk assessment was made.

It says CBA's "conduct in this matter has exposed the Australian community to serious and ongoing financial crime".

In one of a number of cases it outlines, Austrac alleges that between 2015 and 2016 millions of dollars was deposited into 11 accounts that were the proceeds of drug money.

In late 2015 the Australian Federal Police informed CBA that a number of the accounts were connected to a serious investigation into serious criminal offences, but even then CBA allowed some of the accounts to remain open and further transactions occurred.

There are a string of other cases outlined by Austrac which, if proven, indicate serious issues in CBA's compliance system.

CBA's conduct in this matter has exposed the Australian community to serious and ongoing financial crime.

Austrac

Austrac alleges CBA didn't carry out any risk assessment of money laundering or counter terrorism when it rolled out the IDMs in 2012. Then when cash deposits into IDMs started to rise exponentially, it alleges the bank failed to investigate what might be going on.

Nor did it do anything in response to alerts raised in internal transaction monitoring systems or review its money laundering risk assessment despite identification by law enforcement of significant instances of money laundering through IDMs.

The allegations are of such concern that it should be a topic of urgent discussion at board level as to ensure all systems are properly checked and compliance systems in place.

The brutal reality is regulators such as Austrac need to have structures in place that work. Banks are the life blood of the economy and they need to be able to monitor any suspicious trading and report it in a timely manner. If they don't it can hinder intelligence gathering and law enforcement. The profound impact of not doing this can not be swept under the carpet or diminished.

In dollar terms, the regulator alleges CBA committed 53,506 contraventions of the Act, which attracts a maximum fine of $18 million per transaction, or a heart-stopping $1 trillion. It is very unlikely that will be the ultimate penalty but even a fraction of that amount is serious money.

The allegations come at a bad time for the sector as it battles a massive trust issue after a series of scandals, including allegations of rigging bank bill swap rates, financial planning scandals and life insurance scandals.

Loading

The banks have spent a tidy $7 million in the past year on a campaign to repair a battered image and stave off a royal commission.

Despite a series of parliamentary and industry inquiries and a series of mea culpas of sorts by various bank bosses, it seems mistrust is increasing and the scandals keep coming.